Rosneft sold Venezuela assets due to oil price collapse

MOSCOW (MRC) -- Russian state oil company Rosneft's decision to cease operations in Venezuela and sell its assets there to a Russian government-owned company was a "maneuver" made in reaction to collapsing oil prices, a US State Department official said Tuesday, reported S&P Global.

"Rosneft is now losing money, its joint ventures can't sell crude oil for a profit, its trading activities around the world, trying to sell Venezuela oil, are really in trouble," Elliott Abrams, the US State Department's special representative for Venezuela, told reporters during a briefing.

Abrams said that the US government was still trying to learn more about the sale, such as how the new company would be structured and whether it would control all of Rosneft's assets in Venezuela.

The sale, which Rosneft announced Saturday, follows the imposition of US sanctions on two Rosneft trading subsidiaries, Rosneft Trading and TNK Trading, over their activities in Venezuela earlier this year.

Abrams said State estimates that the decline in oil prices has caused Venezuelan oil output to fall to 500,000 b/d.

Venezuelan oil output averaged 820,000 b/d in February, according to the latest S&P Global Platts OPEC survey.

"I think it's very clear that the amount of money going to (Venezuela's Maduro) regime is in very steep decline," Abrams said. "They're not getting the cost of production so you can see the impact is enormous."

Earlier in the briefing, Secretary of State Mike Pompeo denied that the Trump administration saw low oil prices as an opportunity to ratchet up oil sanctions, something analysts have said the administration is doing.

"Oil prices will go up, they'll go down, our mission set remains unchanged," Pompeo said.

On Tuesday, the State Department unveiled a proposal which would lift all sanctions on Venezuela, including US sanctions on petroleum exports, if it establishes a new, transitional government and holds internationally-sanctioned presidential elections within a year.

As MRC informed before, Russian oil giant Rosneft said its refinery plant in Ryazan stopped a primary crude processing unit to carry out planned maintenance on March 17, 2019. The plant remained closed until March 31, 2019, according to the energy ministry's statement.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.

Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time.

Solvay partners with Boeing for COVID-19 face shields

MOSCOW (MRC) -- In response to urgent needs by medical professionals for protective equipment to combat COVID-19, Solvay is supplying high-performance, medical-grade transparent film to Boeing for its production of face shields, said the company.

Boeing approached Solvay due to its experience in the use of advanced composite and adhesive materials on multiple commercial and defense programs.

Manufactured by Solvay's Ajedium™ Films business, the thermoplastic film will be used by Boeing in the production of thousands of face shields critically needed by hospitals and medical workers in the U.S. to protect them from the COVID-19 virus. The film will be manufactured using Solvay’s medical-grade Radel® PPSU or Udel® PSU, two transparent specialty polymers widely used for medical devices because of their ability to be sterilized and withstand aggressive disinfectants.

"We are honored to bring our product expertise to our customers in this time of crisis," explains Jeff Hrivnak, healthcare global business development manager for Solvay Specialty Polymers. "Boeing is rising to the occasion by providing more durable, face shields now in critical demand for our heroic healthcare workers, and we are proud to help make that possible."

As MRC informed earlier, DOMO Chemicals has completed its acquisition of Solvay’s Performance Polyamides Business in Europe. This Business includes Engineering Plastics operations in France and Poland; High Performance Fibers in France; Polymer and Intermediates operations in France, Spain and Poland. The Business comprises Production, Sales, Technical Support, R&D and Innovation services in France, Spain, Poland, Germany and Italy that currently have a combined headcount of approximately 1,100 employees. The agreement also involves a joint venture between BASF and DOMO in France for the production of Adipic Acid.

We remind that, as MRC wrote earlier, BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes шт 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Hangin Technology shuts PO unit in Liaoning

MOSCOW (MRC) -- Hangjin Technology Co, has undertaken an unplanned shutdown at its propylene oxide (PO) unit, according to Apic-online.

A Polymerupdate source in China informed that, the company halted operations at the unit on April 1, 2020. The exact duration of the outage could not be ascertained.

Located in Liaoning, China, the unit has a production capacity of 40,000 mt/year.

Propylene oxide is used for the production of refractory materials, modified carbohydrates, synthetic lubricants, chemicals for drilling oil fields and textile surfactants.

Propylene is the main feedstock component for the production of polypropylene (PP).

According to MRC's ScanPlast report, Russia's February PP production decreased to 157,700 tonnes from 168,600 tonnes in January, several producers reduced their capacity utilisation. Russia's overall PP production reached 326,300 tonnes in January-February 2020, compared to 212,700 tonnes a year earlier. Six out of eight producers increased their capacity utilisation, while the two largest producers from Tobolsk provided the largest increase in the output.

Oil ends March with biggest monthly and quarterly losses ever

MOSCOW (MRC) -- Crude oil benchmarks ended a volatile quarter with their biggest losses in history, as both U.S. and Brent futures were hammered throughout March on the global economic freeze due to the coronavirus pandemic and the eruption of a price war between Russia and Saudi Arabia, reported Reuters.

Both benchmarks lost roughly two-thirds of their value in the quarter, with March’s declines of about 55% accounting for the lion’s share of the losses.

U.S. West Texas Intermediate crude salvaged the end of the month with a modest 2% gain on Tuesday, while Brent ended slightly lower.

Global fuel demand has been destroyed by travel restrictions due to the coronavirus pandemic. Forecasters at major merchants and banks see demand slumping by 20% to 30% in April, and for weak consumption to linger as economic activity is severely curtailed for the next several months.

WTI CLc1 settled 39 cents higher at $20.48 per barrel. The U.S. benchmark plunged 54% during March and 66% for the first quarter, the worst declines since the contract’s inception in 1983.

May Brent crude futures LCOc1 ended the session 2 cents lower at USD22.74 a barrel ahead of expiration. The international benchmark fell 66% in the first quarter and 55% in March, the worst quarterly and monthly percentage declines on record.

The more-active June contract LCOM0 settled 7 cents lower at USD26.35 a barrel.

Oil drew in some buyers after U.S. President Donald Trump and Russian counterpart Vladimir Putin agreed to talks on stabilizing energy markets. Markets have been in turmoil for more than three weeks after Saudi Arabia and Russia were unable to come to an agreement to curb supply to combat the growing COVID-19 coronavirus pandemic.

That took prices down sharply earlier in the month, but markets dropped even more as the pandemic worsened. More than 800,000 people have been infected and more than 39,000 have died.

So far it is unclear if Trump and Putin’s efforts will come to fruition. Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries were unable to come to an agreement on Tuesday to meet in April.

Saudi Arabia, the de facto leader of OPEC, and Russia, which had allied with OPEC to curb output for more than three years beginning in late 2016, remain at loggerheads. The Saudis plan to boost oil exports to 10.6 million barrels per day (bpd) from May on lower domestic consumption.

The weakness in futures markets has been surpassed by the physical markets, where cargoes are selling at single digits in key markets like Canada, Mexico and Europe, reflecting expectations for the coming collapse in demand that will strand barrels of oil.

“COVID has taken the oil market hostage,” said Michael Tran, managing director of energy strategy at RBC Capital Markets in New York.

“The unprecedented pace of demand destruction has forced the hand of refineries, on a global level, to issue run cuts, leaving barrels from the U.S. to the North Sea, to Asia searching, often unsuccessfully, for homes.”

Fuel demand is expected to fall sharply in coming months, with Trafigura’s chief economist predicting a 30% falloff in demand. Worldwide aviation is basically shut down, and motorists are staying off the roads.

“It’s just a matter of time before we see the producers be forced by the crude gatherers to cut as one cannot ‘gather’ crude when there are no buyers or tanks to store it in,” said Scott Shelton, energy specialist at United ICAP.

U.S. crude output fell to 12.7 million bpd in January from 12.8 million bpd in December, the U.S. Energy Information Administration (EIA) said in a monthly report on Tuesday.

That was the first time since July 2019 that U.S. crude output has declined two months in a row. Goldman Sachs anticipates that U.S. supply will fall by roughly 1.4 million bpd by the third quarter of 2021 to deal with falling demand.

A Reuters survey of 40 analysts forecast Brent crude prices LCOc1 would average USD38.76 a barrel in 2020, 36% lower than the $60.63 forecast in a February survey.

U.S. crude stocks rise less than expected last week

MOSCOW (MRC) -- U.S. crude stocks rose less than expected last week as refineries hiked output, while gasoline and distillate inventories fell, the Energy Information Administration said, as per Hydrocarbonprocessing.

Crude inventories rose by 414,000 barrels in the last week, compared with analysts’ expectations for an increase of 2.5 million barrels. Refinery crude runs rose by 190,000 barrels per day, EIA data showed. Refinery utilization rates rose by 1.4 percentage points. Net U.S. crude imports fell last week by 1.03 million barrels per day.

“A solid tick higher in refining activity and a firm drop in net imports has resulted in minor build to crude stocks,” said Matt Smith, director of commodity research at ClipperData. “This lesser build than expected, combined with draws to the products, is providing further encouragement for today’s rally."

Oil prices extended gains after the data, with Brent crude up about 1% and U.S. crude futures gaining about 1.6% by 11:29 a.m. ET (1629 GMT). Still, in the East Coast, refinery utilization rates dropped to the lowest level since November 2012, the data showed.

The gasoline-producing unit at Phillips 66’s Bayway Refinery in Linden, New Jersey, the largest on the East Coast, has been shut since early this month. Gasoline stocks fell by about 2 million barrels, compared with analysts’ expectations in a Reuters poll for a 435,000-barrel gain.

Distillate stockpiles, which include diesel and heating oil, fell by 636,000 barrels, versus expectations for a 1.5 million-barrel drop, the EIA data showed. “The refinery utilization rate is probably the most important number here. It looks like turnaround season is basically over, said Bob Yawger, director of energy futures at Mizuho in New York. “That’s the number that managed to lower the crude oil build.” Crude stocks at the Cushing, Oklahoma, delivery hub fell by 133,000 barrels, EIA said.

As MRC informed earlier, brent oil futures may be trading at USD27 per barrel but oil producers are selling their crude in the physical market at lower prices not seen since the aftermath of the Asian financial crisis of the late 1990s. Most are offloading their oil for below USD20 a barrel as the coronavirus pandemic savages demand and global supply rises amid a battle between Saudi Arabia and Russia for market share, according to traders, state oil firms, major refiners and prices quoted in physical markets.

As MRC informed earlier, US-based Phillips 66 is delaying three sizeable scheduled shutdowns at its refineries this year, the company said last week, because of concerns that coronavirus could spread among the refineries' workers if the maintenance goes ahead.

We also reminad that Phillips 66 remains open to developing another ethane cracker for its Chevron Phillips Chemical (CP Chem) joint venture, the refiner's CEO said in March 2018.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).